Apart from still open Solvency II third-country equivalence issues, which will be discussed in detail later, European insurance companies struggle with different interpretations of the European Insurance Occupational Pension Authority (EIOPA) guidelines and rules. For example, while sovereign debt is considered risk-free in the Standard Formula, EIOPA recommended in April 2015 that internal model firms need to consider the spread risk of sovereign debt. However, local supervisors have not interpreted this guidance in the same way - the United Kingdom’s Prudential Regulatory Authority, France’s Autorité de contrôle prudentiel et de résolution and Germany’s Federal Financial Supervisory Authority are asking their internal model firms to fully risk-weight sovereign bonds at the group level. Other supervisors are proposing a “light” approach of risk-weighting of sovereign debt, while Italy and Spain maintain the position that sovereign bonds should remain risk-free under Pillar 1.

Another challenge for insurance companies and groups arises from singular regulatory developments in certain countries, for example, early warning indicators in the United Kingdom and the execution of specific stress tests in many countries.

Are these the first steps away from a unique supervisory system in Europe? Is there any danger of diverging regulation in the future? Or will this really lead to a level playing field - one of the main goals of Solvency II?